Thursday Watch

Evening Headlines

Bloomberg:

• Ten Cities Tell the Tale of China's Spreading Real-Estate Risk. Beijing and Shanghai are now well known for their ballooning house prices -- double-digit gains last year prompted more regulatory tightening. But the the risk factors that could decide the fate of China’s property boom can be found well beyond the capital and biggest city. A close look at the available economic data of ten cities reveals big differences in the factors that can inflate, and deflate, property bubbles, including population growth, income gains and the ratio between house prices and pay.

• Why Sanctions Against North Korea Are Causing Pain in China. Along China’s border with North Korea, residents are more worried about feeding their families than the possibility of nuclear war. In Hunchun, a city of about 230,000 people near China’s shared frontier with North Korea and Russia, protests briefly broke out last month after the United Nations Security Council approved sanctions banning exports of seafood and other goods from Kim Jong Un’s regime. Dozens of wholesale stores were shuttered, dealing a blow to the packagers, distributors, drivers and restaurateurs who depend on the trade.

• Soaring Food Prices Spice Up Asia's Inflation Outlook. Radish prices jumped 71 percent from a year earlier in South Korea last month. In India, prices for tomatoes and onions have doubled from a year ago. Japan’s squid prices rose 17 percent in July from a year earlier. And in China, egg prices have surged at least 62 percent since April at Beijing’s Xinfadi, the nation’s largest agriculture wholesale market. With exports across Asia faring better than just about anyone expected and domestic demand in most markets robust, could this be the start of a long-anticipated inflation breakout?

• Yen Falls as Dollar Jumps on Fed's Hawkish Tone. The yen maintained losses in early Asian trading after the dollar surged and Treasuries tumbled as the Federal Reserve struck a more hawkish tone than markets anticipated. Asian equity-index futures signaled a mixed start. The yen was weaker for a fifth day after Bloomberg’s dollar index rose with the central bank setting an October start for shrinking its balance sheet and maintaining a forecast for another rate increase this year. The 10-year Treasury yield approached 2.30 percent. A slump in Apple Inc. dragged tech shares lower. Oil advanced above $50 a barrel and gold was steady. Contracts on the Nikkei 225 Stock Average rose, while they fell on the Kospi index and were little change on the Australian benchmark.

• Five Things You Need to Know to Start Your Day.

• Managers of $3 Trillion Buy Dollars After Worst Slide in Decade. The dollar has been mired in its worst slump in a decade, battered by political drama in Washington and shifting bets on central-bank policy. Managers of $3 trillion say the carnage has gone on long enough. Mellon Capital Management Corp., State Street Global Advisors and UBS Asset Management are wagering that the greenback will recoup some of its 9 percent slide in 2017 as traders embrace a scenario that was all but written off a few weeks ago: a December rate hike by the Federal Reserve. That view gained traction Wednesday after policy makers stuck to their forecast for another increase this year. The dollar surged on the announcement.

Wall Street Journal:

• Hackers Entered Equifax Systems(EFX) in March. Equifax previously disclosed data was potentially accessed in May.

• Fed to Start Paring Holdings, Keeps December Rate Rise on the Table. The central bank in October will begin slowly shrinking its $4.5 trillion portfolio.

• Tax Reform Progress. A Senate budget deal creates more space for cutting tax rates.

• Republicans Get One Last Chance on ObamaCare Reform. Graham-Cassidy is not perfect, but it creates a competition of ideas and gives power back to states.

MarketWatch.com:

• Toys ‘R’ Us bankruptcy could push retail loan default rate past 10% by year-end: Fitch.

Fox News:

• Samantha Power sought to unmask Americans on almost daily basis, sources say. (video)

• Hurricane Maria destroys hundreds of homes, knocks out power across Puerto Rico. (video)

CNBC:

• Tesla(TSLA) is working with AMD(AMD) to develop its own A.I. chip for self-driving cars, says source. (video)

• Amazon(AMZN) is taking on the drug supply chain, says report.

• Obamacare repeal bill will head to vote in Senate next week, GOP leader says.

Zero Hedge:

• Prosecutors Unveil Full Details Of Anthony Weiner's Pedophilia.

• Sharyl Attkisson Rages "Looks Like Obama Spied On Trump, Just Like He Did To Me".

• Hurricane Maria Floods San Juan, Knocks Out Power Across Puerto Rico.

• This $700 Billion Public Employee Ticking Time Bomb Is Only 6.7% Funded; Most States Are Under 1%.

• What, No Hurricane Bounce? Ford(F) Idles 5 North American Plants In Wake Of Slumping Car Sales.

• 'Hawkish' Fed Fail? Yield Curve Flattens Most Since 2016 As Dollar Spikes. (graph)

Night Trading 

• Asian equity indices are -.25% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 78.75 +7.0 basis points. 

• Asia Pacific Sovereign CDS Index 15.50 -2.5 basis points.

• Bloomberg Emerging Markets Currency Index 74.46 -.06%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SCHL)/-1.29

Economic Releases 
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 300K versus 284K the prior week.

• Continuing Claims are estimated to rise to 1975K versus 1944K prior.

• Philly Fed Business Outlook for September is estimated to fall to 17.1 versus 18.9 in August.

9:00 am EST

• The FHFA House Price Index MoM for July is estimated to rise +.4% versus a +.1% gain in June.
  

10:00 am EST

• The Leading Index for August is estimated to rise +.3% versus a +.3% gain in July.
  

12:00 pm EST

• 2Q Household Change in Net Worth.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ rate decision, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for September, weekly EIA natural gas inventory report and the (RMBS) financial analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are slightly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.